The Secret of the Most Successful Online Deal

For one day only, customers had the option to pay $10 in advance to purchase a $20 Amazon gift card from LivingSocial, a popular coupon site. Certainly this was a bargain by any standard, but given that millions of consumers have become accustomed to seeing similarly generous deals from retailers thanks to the rise of group buying sites like LivingSocial and Groupon, it wasn’t exactly anything out of the ordinary.

But apparently consumers disagreed.

By the time the deal expired at 8 a.m. EST this morning, 1.3 million of these vouchers had been sold, netting LivingSocial and Amazon a collective $13 million in cash upfront in merely 24 hours, and making this the most successful online coupon campaign in history, in terms of gross revenue.

Prior to this, the biggest success story was a similar deal that Groupon offered in the summer of 2010 for half off a $50 gift card from the Gap. Customers bought up nearly half a million of these vouchers, which generated about $11 million in revenue for the two companies.

These two promotions provide strong evidence for the secret to a lucrative deal campaign. While these deal sites may normally stick to offering coupons for local stores and niche activities, most of which are generally successful in their own right, the highest grossing deals seem to be those that feature big-name retailers that function on a national level.

The benefits to this kind of deal are obvious. There will always be a pool of consumers more interested in a national store than a local store, since it appeals to a national audience. Moreover, consumers will generally be less hesitant to pay money in advance for a brand that they’ve purchased before, rather than making a small investment in a new local company.

Of course, the downside to this arrangement is that while Amazon made a quick $13 million now, it may end up losing that much money in the long run, since it’s effectively giving away free money to customers who would probably shop there anyway. But what makes this particular venture a win-win is that Amazon is actually an investor in LivingSocial, meaning that while it may lose money through this deal, the promotion is still likely to raise awareness about the site among consumers.

Beyond this, it appears LivingSocial had one other powerful trick up its sleeve to help make this deal such a big success: social media. As of this morning, this particular deal had been shared more than 45,000 times on Facebook alone, which undoubtedly helped get the word out to consumers.